Managers Ken Salmon, 47, and Patrick Gundlach, 32, talked with IBD about their approach to the market with this fund from their quarters in Milwaukee.

IBD: How do you expect 2011 to differ from 2010?

Salmon: We're not top-down guys. We don't do sector allocations.

IBD: Understood. But sector weightings show where you expect to find individual opportunities. And as of Dec. 31, software was your largest sector, with about 17% of your assets. That was about triple the S&P 500's weighting. Why are you finding so many attractive names there?

Salmon: We see fundamental improvements in many areas — tech, semiconductors, semi cap equipment, IT services and software. Generally speaking, we have more comfort in software. Product cycles tend to be longer than in the other segments.

There's also a continuing trend toward subscription-type models of business or software-as-a-service. That's in contrast to the other license model, which can be more volatile.

IBD: Give an example.

Gundlach: Right. One of our larger positions is QuinStreet (NASDAQ:QNST). It's an online advertising firm. They generate leads for their clients in education and the financial space.

It IPO'd a year ago. We bought it in August, after it reported Q2 results, around 11. Now it's one of our top top, trading north of 22.

A lot of investors were afraid that the regulatory crackdown on the private education space would hurt QuinStreet.

We thought those changes would be good for them. It has. As for-profit educators have difficulty finding students, the pricing of leads from a company like QuinStreet goes up. And educators focus more on reliable sources like QuinStreet.

IBD: Tell us what you like about Ebix (NASDAQ:EBIX). The software company that caters to the insurance industry is a top holding as of your latest disclosure.

Gundlach: They benefit from the trend to digitizing insurance processes. As things move from paper records to the computer, Ebix has software that facilitates that.

Their strong earnings and growth rates stem from smart, organic growth. They also cross-sell products into their customer base. And their acquisitions complement their existing products.

See Also

IBM (NYSE:IBM) is going all-in on the Internet of Things. The information technology giant said on Tuesday that it will plow $3 billion over the next four years into building a new Internet of Things unit. The company is also developing a cloud-based open platform to help customers and its partners ...

The Federal Communications Commission, following the preference of phone companies, on Thursday unanimously awarded a major telecom database contract to Ericsson's Telcordia Technologies, which the agency said easily outbid incumbent Neustar. Industry trade group USTelecom — whose members ...

Ciena (NYSE:CIEN) could get more revenue than originally thought providing a 100-gigabit metro network for Verizon Communications. So concludes Catharine Trebnick, an analyst for Dougherty & Co., in a research report Wednesday, a day following Verizon 's (NYSE:VZ) announcement that it had ...

Sonus Networks (NASDAQ:SONS) shares plunged more than 30% Tuesday after the struggling network equipment maker lowered its guidance and said it's looking for ways to cut costs amid shrinking revenue. For the quarter ending March 27, the Westford, Mass.-based company now expects a non-GAAP per-share ...

If cash is king, then Microsoft (NASDAQ:MSFT) wears the crown. Among companies in the S&P 500, Microsoft had the highest amount of cash and short-term marketable securities as of the end of Q4, to the tune of $90.25 billion, reports FactSet Research. General Electric (NYSE:GE) is close behind ...

03/20/2015 02:45 PM ET

More Mutual Funds Articles:

Investors stuffed a net $8.32 billion into stock funds in February as the market rose. Amid a rally in the price of crude oil, it was the second straight month of inflow. But it was less than January's inflow of $12.44 billion, according to the Investment Company Institute. Signs pointed to outflow ...

U.S. diversified stock funds reversed course, losing ground in the week ended March 26. They lost 1.46%, according to Lipper Inc. That was their third weekly setback in the past four weeks. The latest week's retreat cut the year-to-date advance by U.S. diversified stock mutual funds to 1.54%. World ...

Investors are prowling for more income, without adding much risk, than they can wring from the likes of CDs. So, closed-end funds (CEFs) continue to have a following. Unlike an open-end mutual fund, a CEF has a fixed number of shares. It doesn't take in more money after its IPO . It trades like a ...

Large-cap growth funds have lagged way behind their large-cap value and core peers in the past 15 years. But they've made up some ground in recent years. You can see the results in an investment of $10,000. Placed in the average large-cap growth mutual fund on Dec. 31, 1999, your investment would ...

Nuveen Large Cap Growth Opportunities Fund isn't the only stock mutual fund seeking companies that exhibit a catalyst for above-average earnings growth. But the fund's managers have used this approach to land a strong pack of leading stocks. And the fund's position in the relative-ranking standings ...

Select market data is provided by Interactive Data Corp. Real Time Services. Price and Volume data is delayed 20 minutes unless otherwise noted, is believed accurate but is not warranted or guaranteed by Interactive Data Corp. Real Time Services and is subject to Interactive Data Corp. Real Time Services terms. All times are Eastern United States. *Reflects real-time index prices.